Key Events In The Coming Week

The main news to watch this week in DMs are various PMIs (for May), ECB MP Decision (expect downward shift in interest rate corridor and targeted credit measures), US Nonfarm Payrolls (consensus 215K) and Unemployment (expect 6.4%), and MP Decisions in Australia and Canada (expect both on hold). Among other releases, next week in DMs includes [on Monday] expanding US ISM Manufacturing and Construction Spending, PMI in Canada and European countries; [on Tuesday] US factory orders and firming vehicle sales, Euro area CPI, Australia MP Decision; [on Wednesday] US ADP Employment Change and ISM Non-Manuf. Composite, Canada MP Decision, Euro area Composite PMI and 1QP GDP, UK Composite PMI; [on Thursday] MP decisions by ECB (Goldman expects a shift down in the interest rate corridor by 15bp to a deposit rate of -0.15% and an MRO rate of 0.10%, in addition to targeted credit measures) and BoE (expect no change in policy), German factory orders; and [on Friday] US Nonfarm Payrolls (consensus of 215K), US Unemployment (expect 6.40%), and Japan Leading Index.

This week's busy calendar starts off with today’s global PMIs and ISMs. On Tuesday, President Obama begins a four day European trip ahead of the G7 meeting which starts on Wednesday. This G7 meeting is replacing the G8 meeting that was originally scheduled in Sochi but was cancelled after Russia’s annexation of Crimea. Tuesday’s data docket is important with Euroarea data releases including inflation and unemployment expected to further cement the ECB’s resolve in easing policy come Thursday.

The Reserve Bank of India meets on Tuesday where rates are expected to remain on hold in the first RBI meeting since the new government took office. Wednesday features the global services ISMs and PMIs. Other data releases scheduled for that day includes the ADP employment report, which will provide an important preview to Friday’s NFP, and US trade. The Fed releases its Beige Book on Wednesday too and the second estimates of Euroarea GDP will be published on Wednesday as well.

Apart from the ECB on Thursday, we also have the BoE policy meeting. Elsewhere in the UK there will be a by-election held in the seat of Newark, central England – this will be interesting to see whether the recent successes of the UK Independence Party can translate to the party winning its first ever House of Commons seat. The Conservatives currently hold that seat. Datawise, we have US jobless claims, Euroarea retail sales and German factory orders.

Friday sees the release of US payrolls where consensus is expecting gains of around +200k in the headline. The unemployment rate is expected to pick up 0.1ppt to 6.4% due to rising participation. Moody’s updates sovereign ratings for the EFSF and ESM while S&P will update its rating view on Italy.

Australia | MP Decision: Consensus expects rates on hold (at 2.50%), but it will be interesting to see how the RBA balances early indications that growth held up relatively well in 1Q2014 against the more recent worrying deterioration in consumer sentiment and iron ore prices.

Euro area | MP Decision: Goldman expects the ECB to shift the interest rate corridor down by 15bp (to a deposit rate of -0.15% and an MRO rate of +0.10%) and also to announce targeted credit measures. it does not, however, expect any signal that the Governing Council is pondering in earnest a large-scale asset purchase programme.

United Kingdom | MP Decision: Consensus expects no change in policy at the BoE, and expects the committee to vote unanimously to keep rates on hold (bank rate at 0.50%, asset purchase target at £375B).

Events: Speech by ECB’s Constancio; Hungarian PM Orban to present members of his new government; Sovereign Debt Ratings may be published for EFSF (Moody’s), ESM (Moody’s), Finland (Moody’s), Ireland (S&P) and Italy (S&P).

Mexico | MP Decision: Consensus expects rates on hold (at 3.50%) and to reiterate the broadly neutral near term policy bias. The MPC likely feels that the economy does not need more monetary stimulus at this juncture, given that monetary and fiscal policy are already stimulative and the authorities remain confident in the assessment that the economy will pick up forward momentum in the near-term. Additional rate cuts in Mexico to offer extra support to activity against a backdrop of likely gradually rising Dollar yields in the near term would run the risk of tightening the domestic-foreign interest rate differential excessively and destabilizing the MXN and investor appetite to remain engaged in local markets. continues to widen.